Growth investing is one of two main fundamental investment strategies, the other being value investing. Investors employing a growth investing strategy will typically place the majority of their portfolio in growth stocks, which are shares of companies whose earnings or sales are expected to grow at a significantly faster rate than the rest of the market. They generally dont pay dividends at this stage since all earnings are usually reinvested back into the business to generate even more earnings or revenue in the future. The primary way investors expect to earn profits from growth investing is through capital gains. Classic examples of growth stocks include Facebook Inc. (FB), Amazon.com Inc. (AMZN), and Netflix Inc. (NFLX).
Growth stocks, as represented by the Russell 1000 Growth Index, have underperformed the broader market over the past year. The Growth Index has provided a total return of 27.6% over the past 12 months, just behind the Russell 1000 indexs 31.8% total return, as of Aug. 26. All statistics in the tables below are also as of Aug. 26.
Here are the top 3 stocks with the fastest earnings per share (EPS) growth, the top 3 stocks with the fastest sales growth, and the 3 stocks ranked according to a 50/50 weighting of their combined EPS and sales growth.
Top Growth Stocks by EPS Growth
These are the stocks with the highest year-over-year (YOY) EPS growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders. Companies with quarterly EPS of over 2,500% were excluded as outliers.
- Freeport-McMoRan Inc.: Freeport-McMoRan is a leading international mining company with significant reserves of copper, gold, and molybdenum. The company has operations in North and South America and Indonesia.
- Ross Stores Inc.: Ross Stores operates off-price apparel and home accessories stores. The company operates Ross Dress for Less and dds DISCOUNTS stories across the U.S. Ross reported that net earnings rose more than 22-fold YOY in Q2 2021 to $494.3 million compared to the same quarter a year earlier. The company attributed this performance to strong sales growth fueled by increasing customer demand and government stimulus payments.
- Chipotle Mexican Grill Inc.: Chipotle Mexican Grill owns and operates a chain of restaurants serving burritos, bowls, tacos, and salads. The company has locations throughout the U.S. For Q2 2021, Chipotle reported a 31.2% YOY increase in comparable restaurant sales, as well as significant growth in digital sales. Digital sales represented just under half of total sales for the quarter.
Top Growth Stocks by Sales Growth
These are the stocks with the highest YOY sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue through organic or new ways, and find growing companies that have not yet reached profitability. In addition, EPS can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. Companies with quarterly revenue growth of over 2,500% were excluded as outliers.
- ConocoPhillips: ConocoPhillips focuses on oil and natural gas exploration and production with operations across 15 countries. It produces crude oil, bitumen, natural gas, natural gas liquids and liquefied natural gas.
- Zoom Video Communications Inc.: Zoom Video Communications is a provider of a video-first communication platform and Web conferencing services. Its cloud platform offers video, voice, content sharing, and chat for mobile devices, desktops, telephones, and conference room systems. In early August, Zoom agreed to pay $85 million to settle a lawsuit alleging that it had violated its users privacy rights. The claimants alleged that Zoom had shared users personal data with companies such as Facebook Inc. and LinkedIn, and that the company allowed hackers to disrupt Zoom meetings. As part of the settlement, Zoom denied any wrongdoing while agreeing to strengthen its security practices.
- Builders FirstSource Inc.: Builders FirstSource makes and distributes building products, and provides integrated services to professional homebuilders. Its one of the largest suppliers in the building industry. On Aug. 17, the company closed its acquisition of WTS Paradigm LLC, a software solutions and services provider for the building products industry. Builders FirstSource says that WTS Paradigm will operate as an independent business and will enhance the parents digital platform capabilities. Terms of the acquisition were not disclosed in the press release.
Top Growth Stocks by EPS and Revenue
These are the top growth stocks in the Russell 1000 index as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. Moreover, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
|Top Growth Stocks by EPS and Revenue|
|Price ($)||Market Cap ($B)||Revenue Growth (%)||EPS Growth (%)|
|Freeport-McMoRan Inc. (FCX)||35.11||51.5||88.2||2,330|
|Ross Stores Inc. (ROST)||123.98||44.3||79.0||2,220|
|Louisiana-Pacific Corp. (LPX)||62.52||6.0||141.8||1,590|
- Freeport-McMoRan Inc.: See above for company description.
- Ross Stores Inc.: See above for company description.
- Louisiana-Pacific Corp.: Louisiana-Pacific Corp. makes building materials and engineered wood products. The company provides oriented strand board sheathing, siding and trim, i-joists, laminated veneer lumber, and similar products.
The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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